Weavers, Inc. has an inventory turnover of 22 and an accounts payable turnover of 13. The accounts receivable period is 39 days. What is the length of the cash cycle?

Question

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The cash cycle is calculated as the inventory period plus the accounts receivable period minus the accounts payable period. First, we need to find the inventory period and the accounts payable period in days. Inventory turnover of 22 means the company sells and replaces its inventory 22 times a year. Accounts payable turnover of 13 means the company pays its suppliers 13 times a year. The inventory period = 365 / Inventory turnover = 365 / 22 = 16.59 days. The accounts payable period = 365 / Accounts payable turnover = 365 / 13 = 28.08 days. The cash cycle = Inventory period + Accounts receivable period - Accounts payable period = 16.59 + 39 - 28.08 = 27.51 days.